Saving for a down payment can take a long time. However, if you’re fortunate to have family willing to give you a monetary gift that you can use for your down payment, you can reach your goal of home ownership must faster.
According to the 2017 National Association of REALTORS® Profile of Home Buyers and Sellers report, nearly 25% of first-time home buyers used cash gifts from family for a down payment. If any family members are willing to gift you some down payment money, you’ll need to get a signed statement from the giver that explicitly states the money is a gift, not a loan, and that no repayment is required. The mortgage gift letter must include the giver’s name, address, and contact information; the recipient’s name and relationships to the giver; and the dollar amount and approximate date of the gift.
Here is a sample gift letter you may be able to use. Your lender may require additional information:
August 1, 2019
To Whom It May Concern:
I am giving my son, John Smith, a gift of $7,000 toward the purchase of his home. I do not expect or require any kind of repayment for this gift. I wrote the check for these funds on July 15, 2019, and he deposited it the next day. Should you need to contact me regarding this gift, you can do so using the information below.
Sincerely,
Michael Smith
1234 Main Street
Anytown, CA 90210
(123) 555-4459
Whatever you do, don’t take a loan from family and try to pass it off as a gift. If it needs to be repaid at any time in the future, it’s a loan and not a gift. If the money really is a loan, your lender will need to factor that amount into your debt-to-income ratio.
The good news is an individual can give up to $14,000 to an unlimited number of people each year and still face no federal gift tax. In other words, two parents could each give a son and daughter-in-law $14,000. That’s $28,000 per person, or $56,000 total. That’s a big down payment.
So don’t be afraid to ask Mom or Dad (or your favorite aunt or uncle) if a gift is possible. It may help you get that home of your dreams sooner than you ever thought possible.
Is applying for a mortgage in your future? Contact us. As mortgage bankers, we can help you make the best decision for your needs.
Have Questions, Reach out to me for more information.
Call me at (707) 254-8891
Hilda Hensley Branch Manager – Mortgage Advisor
NMLS id 280206
Benchmark Mortgage
Ark-La-Tex Financial Services, LLC NMLS id 2143
